Self-governance leads to higher levels of innovation

A recent study finds self-governance has profound advantages in the marketplace, leading to the highest levels of innovation, employee loyalty, and customer satisfaction, as well as the lowest levels of misconduct.

Flatter organizations with high levels of trust, values and purpose, outpace on innovation, employee loyalty, customer satisfaction and financial performance.

A recent global analysis of how companies really work found that less than 1 in 15 companies in India are self-governing.

These "rare" companies experience profound advantages in the marketplace. Then again, India is doing pretty well insofar as self-governance is concerned for, globally, fewer than 1 in 30 companies are self-governing.

According to the survey, known as the HOW Report, a self-governing organization is one that manifests high trust; and acts and makes decisions based on a set of core values. "It founds its efforts on a deep commitment to a larger purpose; leads by inspiration (as opposed to carrots and sticks or coercion); and is characterized by transparency, collaboration, and a long-term horizon," the study revealed.

The HOW Report looks at how governance, culture and leadership influence behavior and impact performance. The findings were derived from a statistical analysis of observations from over 36,000 employees at all levels in 18 countries, including 3,000 employees in India. The report was developed by LRN and conducted by the Boston Research Group, in collaboration with Research Data Technology and The Center for Effective Organizations at the University of Southern California.

The study identifies three business "archetypes" describing how companies operate: blind obedience, informed acquiescence, and self-governance.

It found that while only 6 percent of companies in India were Self-governing, 26 percent fell into the blind obedience category, and 68 percent belonged to the informed acquiescence archetypes. The global average numbers were 3 percent self-governing, 43 percent blind obedience, and 54 percent informed acquiescence.

Like companies worldwide, companies in India that were self-governing performed the highest on every one of the 14 performance outcomes in the study, including higher employee loyalty, customer satisfaction and lower misconduct. Self-governing organizations were also more resilient and observed by their employees to beat the competition, usually by huge margins, on innovation and financial performance.

"We manage what we measure, and as the world becomes more interdependent, it's critically important to have metrics for how companies really operate--how their people behave and make decisions," said Dov Seidman, CEO of LRN, a solutions and advisory firm.

"Companies that meet the standard of self-governance have profound advantages in the marketplace. They have the highest levels of innovation, employee loyalty, and customer satisfaction and the lowest levels of misconduct," Seidman added.

As per the report, 90 percent of employees of self-governing companies observed levels of innovation were high relative to the competition. And 93.3 percent of employees in these organizations expressed high degrees of loyalty to their companies, 35.6 percent and 7.2 percent higher than those from blind obedience and informed acquiescence companies, respectively.

Financially, too, self-governance companies performed much better with 96.7 percent of respondents noting financial performance was greater than their competitors, besting those from blind obedience by 40.5 percent and informed acquiescence by 22.6 percent.